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Why Halloween May Not Come for Party City

When many retailers count on Christmas and Easter to boost sales, Halloween is the most important holiday of the year for Party City (NYSE: PRTY).

The annual pagan celebration of Samhain, the ancient Celtic festival of the year's final harvest that has gone on to become a modern ritual of playing dress-up and begging for candy, represents 20% of the party supply store's annual domestic revenue, or over $400 million of its $2 billion U.S. retail total.

However, between the coronavirus pandemic and rising competition, 2020 could be the year Halloween doesn't come for Party City.

Image source: Getty Images.

Scary times

Halloween is a $9 billion industry, but the COVID-19 outbreak has doomed the holiday in many parts of the country. Los Angeles County, for example, initially banned trick-or-treating, prohibited haunted house attractions from operating, and prevented other Halloween activities from occurring.

While it subsequently walked back the edict and now discourages instead of prohibits these activities, the holiday is just not going to be the same this year.

The Haunted Attractions Association estimates that half of the 1,200 or so professional haunted houses won't open this year, and a third will go out of business. Even those that will open will be hard-pressed to maintain the social distancing and cleaning protocols advocated for a safe and healthy environment.

The Grim Reaper

Another concern is that parents may not want to allow their kids to go door-to-door to collect candy in a time of social distancing, and many homeowners may not want to have strangers, masked or otherwise, darkening their doorways either. It may also dampen the enthusiasm for decorating and dressing in costume.

That could be disastrous for Party City, which opens hundreds of pop-up stores under the Halloween City banner each year in September and October. Last year it opened 249 such stores in the U.S. and 25 temporary stores in the U.K. and Ireland.

It surveyed 945 mothers late last month about their plans for Halloween this year, and while 98% wanted their families to participate in the holiday fun, only 52% would allow their children to go trick-or-treating if Halloween was being held right then.

Haunted home improvement

While Halloween City has an extensive retail presence for at least two months of the year, it pales in comparison to the leading holiday chain, Spirit Halloween, which operates some 1,400 pop-up stores every year.

And it may have another formidable competitor to worry about: Home Depot (NYSE: HD). The do-it-yourself home improvement warehouse invests more resources each year into becoming a Halloween decor destination.

Walk into any of the big orange box stores this year and you may find yourself confused about where you are. Many stores have large areas at the front of the store dedicated to decorations, animated props, and set pieces.

Over the past few years, Home Depot's claim to fame has been large dinosaur and horse skeletons, but this year it's offering a 12-foot human skeleton that retails for around $300. What's remarkable about these decorations, beyond their size (which could easily be at home in the professional haunted attraction Haunted Overload in New Hampshire, which specializes in outsized props and set pieces), is the quality of the props.

Far too often, the decorations sold by Spirit Halloween and Halloween City are cheaply manufactured and don't last more than a season or two. But there appears to be some care and attention that goes into those being offered for sale at Home Depot.

There are plenty of online vendors too.

Waiting for the Great Pumpkin

Halloween decorations haven't grown to such a degree yet at the home improvement chain that they warrant a call-out in its financial filings or on the earnings conference calls, but the contributions it and Lowe's are making to industry sales may soon put pressure on Halloween City's sales.

Although the pandemic may have opened up plenty of commercial real estate to house the retailer's pop-stores, coupled with the concerns surrounding trick-or-treating and coronavirus, 2020 could be the year Halloween doesn't come for Party City.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.


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